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Booking ((BKNG - Free Report) ), a Zacks Rank #1 (Strong Buy) stock, is one of the largest online travel companies in the world and is the dominant player in the online travel space. The Connecticut-based company provides clients a one-stop shop for all their travel needs. Its broad and diverse travel-related offerings include hotel room bookings, airline tickets, rental cars, vacation packages, cruises, “things to do” at customer destinations, and travel insurance. Though Booking Holdings is the name behind the umbrella company, it has many different brands in its portfolio, including, Kayak, Priceline, OpenTable, and Rentalcars.com, to name a few.
An International Growth Story
Unsurprisingly for the international travel booking juggernaut, earnings came to a screeching halt during the COVID-19 pandemic months. However, BKNG’s earnings have clawed back to pre-pandemic levels and are expected to begin exceeding those levels this year.
Image Source: Zacks Investment Research
What’s driving the growth? BKNG is enjoying earning’s growth spurred on by secular growth factors such as the transition from standard booking procedures of the past to online booking. Because much of BKNG’s business is derived internationally, the secular tailwind should last for years. While much of the U.S. has already adopted online booking, the international market is still in the process of doing so. Furthermore, the European online travel market which BKNG also serves is currently growing faster than the domestic one. That said, BKNG management has made moves to increase domestic revenue by acquiring OpenTable and other U.S.-focused businesses.
Look Beyond the “Sticker Shock”
Though BKNG currently trades at around $2500 a share, investors should override any feelings of “sticker shock” they may have for three reasons:
Reasonable valuation: BKNG’s forward P/E ratio of 19 is basically inline with the S&P 500 Index’s forward P/E of 18. The company’s valuation is also attractive when compared to competitors such as Airbnb ((ABNB - Free Report) ), which has a forward P/E of 32.
Image Source: Zacks Investment Research
Pictured: BKNG P/E versus S&P 500.
You get what you pay for: Like with most things in life; you get what you pay for. The stock market is no different. Institutional investors tend to be attracted to higher priced stocks because they perceive them to be more stable and less risky, higher quality companies, and tend to be issued by companies with long track records of success.
Stock split potential: Management can unlock an immense amount of shareholder value through a stock split. While many institutions don’t mind paying high stock prices, retail investors do. If management decided to implement a stock split, BKNG would attract a wider range of investors. While there are no plans to conduct a split at the moment, a future split would be a potential catalyst for the stock.
Liquidity + Earnings Growth: The Magic Elixir
Growing as a small company and growing as a large company are two completely different ball games. As a company grows into the multi-billions, scaling growth is much more difficult. Large investors are often attracted to mega-cap, liquid stocks with high earnings growth. The reason being is that for a large pension fund or mutual fund to take on a meaningful position, liquidity is a requirement that is non-negotiable. Otherwise, the fund will move the market too much and has a difficult time exiting the stock should that be necessary. At the same time, institutions do not want stagnant growth. Being both liquid and high growth is hard to achieve, but BKNG is one company that has pulled it off. The $97 billion company grew top-line growth at healthy 56% and 41% over the past two quarters.
Technical Picture
The first factor that stands out is BKNG’s relative strength. From a price and volume perspective, BKNG’s performance is encouraging. Over the past six months, shares of competitors such as Airbnb ((ABNB - Free Report) ) and Expedia ((EXPE - Free Report) ) are flat, while BKNG gained 54.6%.
Image Source: Zacks Investment Research
Pictured: 6-month performance of BKNG +54% versus industry peers (flat).
Secondly, the stock has trended well and has continuously found support at its rising 50-day moving average – a sign of a strong trend.
Image Source: Zacks Investment Research
Pictured: BKNG vs. 200-day MA.
As long as shares hold the 50-day moving average zone, investors can feel assured that the uptrend remains intact.
Bottom Line
Investors should expect BKNG to outperform over the next 6-12 months. The online travel giant differentiates itself through its diverse businesses, international foothold, and rare liquidity and earnings growth mix. BKNG’s strong brand name gives the company a clear advantage over its small competitors. Furthermore, since the company offers such a wide variety of services through its ecosystem, customers often end up using the website for a multitude of services, rather than just one.
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Bull of the Day: Booking Holdings (BKNG)
Booking ((BKNG - Free Report) ), a Zacks Rank #1 (Strong Buy) stock, is one of the largest online travel companies in the world and is the dominant player in the online travel space. The Connecticut-based company provides clients a one-stop shop for all their travel needs. Its broad and diverse travel-related offerings include hotel room bookings, airline tickets, rental cars, vacation packages, cruises, “things to do” at customer destinations, and travel insurance. Though Booking Holdings is the name behind the umbrella company, it has many different brands in its portfolio, including, Kayak, Priceline, OpenTable, and Rentalcars.com, to name a few.
An International Growth Story
Unsurprisingly for the international travel booking juggernaut, earnings came to a screeching halt during the COVID-19 pandemic months. However, BKNG’s earnings have clawed back to pre-pandemic levels and are expected to begin exceeding those levels this year.
Image Source: Zacks Investment Research
What’s driving the growth? BKNG is enjoying earning’s growth spurred on by secular growth factors such as the transition from standard booking procedures of the past to online booking. Because much of BKNG’s business is derived internationally, the secular tailwind should last for years. While much of the U.S. has already adopted online booking, the international market is still in the process of doing so. Furthermore, the European online travel market which BKNG also serves is currently growing faster than the domestic one. That said, BKNG management has made moves to increase domestic revenue by acquiring OpenTable and other U.S.-focused businesses.
Look Beyond the “Sticker Shock”
Though BKNG currently trades at around $2500 a share, investors should override any feelings of “sticker shock” they may have for three reasons:
Reasonable valuation: BKNG’s forward P/E ratio of 19 is basically inline with the S&P 500 Index’s forward P/E of 18. The company’s valuation is also attractive when compared to competitors such as Airbnb ((ABNB - Free Report) ), which has a forward P/E of 32.
Image Source: Zacks Investment Research
Pictured: BKNG P/E versus S&P 500.
You get what you pay for: Like with most things in life; you get what you pay for. The stock market is no different. Institutional investors tend to be attracted to higher priced stocks because they perceive them to be more stable and less risky, higher quality companies, and tend to be issued by companies with long track records of success.
Stock split potential: Management can unlock an immense amount of shareholder value through a stock split. While many institutions don’t mind paying high stock prices, retail investors do. If management decided to implement a stock split, BKNG would attract a wider range of investors. While there are no plans to conduct a split at the moment, a future split would be a potential catalyst for the stock.
Liquidity + Earnings Growth: The Magic Elixir
Growing as a small company and growing as a large company are two completely different ball games. As a company grows into the multi-billions, scaling growth is much more difficult. Large investors are often attracted to mega-cap, liquid stocks with high earnings growth. The reason being is that for a large pension fund or mutual fund to take on a meaningful position, liquidity is a requirement that is non-negotiable. Otherwise, the fund will move the market too much and has a difficult time exiting the stock should that be necessary. At the same time, institutions do not want stagnant growth. Being both liquid and high growth is hard to achieve, but BKNG is one company that has pulled it off. The $97 billion company grew top-line growth at healthy 56% and 41% over the past two quarters.
Technical Picture
The first factor that stands out is BKNG’s relative strength. From a price and volume perspective, BKNG’s performance is encouraging. Over the past six months, shares of competitors such as Airbnb ((ABNB - Free Report) ) and Expedia ((EXPE - Free Report) ) are flat, while BKNG gained 54.6%.
Image Source: Zacks Investment Research
Pictured: 6-month performance of BKNG +54% versus industry peers (flat).
Secondly, the stock has trended well and has continuously found support at its rising 50-day moving average – a sign of a strong trend.
Image Source: Zacks Investment Research
Pictured: BKNG vs. 200-day MA.
As long as shares hold the 50-day moving average zone, investors can feel assured that the uptrend remains intact.
Bottom Line
Investors should expect BKNG to outperform over the next 6-12 months. The online travel giant differentiates itself through its diverse businesses, international foothold, and rare liquidity and earnings growth mix. BKNG’s strong brand name gives the company a clear advantage over its small competitors. Furthermore, since the company offers such a wide variety of services through its ecosystem, customers often end up using the website for a multitude of services, rather than just one.